A brief history of app pricing, and why most apps are free

We had a look at some of the app purchasing habits and statistics regarding the Google Play Store and Apple’s Appstore the other day, so to continuing in that vein, Flurry Analytics has done a little more digging into just why mobile apps are priced so low, often to the point of being free.

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For this research, Flurry Analytics looked at preferences for free content verses ad subsidized apps over a four year period, reviewing nearly 350,000 different apps. Interestingly, as much as we may hate seeing ads take up our valuable screen space, Flurry found that even when faced with the choice of ads or paying just $0.99, consumers overwhelming chose the free apps.

Sadly, the research didn’t focus solely on Android, but the company’s insight into the iOS market place, which has been around a little longer, reveals a fascinating trend. Apps are becoming cheaper, and more apps than ever are now free to install without an upfront purchase. Between 2010 and 2012, the percentage of free apps fluctuated slightly, but there’s been a big jump up to 90% this year.

On top of that, the ratio of the most expensive apps, priced $3.99 or above, has shrunk since 2010, suggesting that there’s little appetite for even moderately expensive apps in the mobile market. The research also found that in instances where paid and ad supported apps were available, most people would opt for the ad versions. Furthermore, consumers were also willing to settle for different apps, in order to avoid paying an upfront cost.

Looking at us Android users, Flurry’s research supports the often made assumption that we’re a little more reluctant to open our wallets. As of April 2013, the average price of an Android app, including those which were free, is significantly lower than that paid by iPhone and iPad owners.

You could look this two ways I suppose, either we’re just highly frugal, or simply have a higher tolerance for in app advertisements than our Apple friends are. Flurry also tries to put this down to Apple product owners typically being more affluent, which might hold some truth when you look at the range of budget Android products on offer, but it’s certainly not a hard fact.

So how did we come to this arrangement, surely app developers have something to gain by charging up front prices?

Flurry Analystics also managed to get its hands on the varying prices of apps over time, and the data shows that there’s been lots of price experimentation going on over the past few years.

Rather than simply setting their prices to match or undercut the competition, an increasingly large number of developers have been testing to elasticity of their prices, and have found, through experimentation, that their apps sell best when they are cheap or free.

There’s certainly overwhelming evidence to suggest that as much as we dislike ads, the vast majority of users would rather suffer them than stump up the cash in advance, regardless of whether they own an iPhone or Android handset. Flurry also makes an excellent comparison with television and radio, where advertising is almost universally used to remote, or at least subsidize, the costs of content.

Free apps are certainly here to stay, and we may well see even more of them in the future, perhaps with advertising being used in more ingenious ways to help keeps costs down for the consumer.